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The U.S. Empire Would Have Collapsed Decades Ago If It Didn’t Abandon The Gold Standard

The U.S. will never go back on a gold standard.  The notion that a U.S. Dollar backed by gold would solve our financial problems is pure folly.  Why?  Because, if the U.S. Empire didn’t abandon the gold standard in 1971, it would have collapsed decades ago.

Unfortunately, some of the top experts in the precious metals community continue to suggest that revaluing gold much higher, to say…. $15,000-$50,000 an ounce, would bring confidence back into the Dollar.  Not only will this not happen, it wouldn’t save the Dollar even if it did.

Why?  Well, that is the $10.5 trillion question, isn’t it?

The innate value of the U.S. Dollar died decades ago and will never come back.  Basically, it is a DEAD MAN WALKING.

However, the market hasn’t figured that out yet, but it will.  It is just a matter of time, and time is running out.

Hugo Salinas Price Was The Motivation For Writing This Article

As I mentioned in prior articles, Hugo Salinas Price has been keeping an eye on International Reserves for many years.  In his recent article, A Reversal In The Trend Of International Reserves, he stated the following:

International Reserves peaked on August 1, 2014, at $12.032 Trillion dollars, and as of October 28, 2016 they stood at $11.066 Trillion dollars.

When a trend has been firmly in place in the world for 45 years, a reversal of that trend must be the result of a profound change which will produce a new trend that will not be easily altered, just as the previous trend was unalterable for 45 years. The new trend is deflation, contraction of credit.

The reason the International Reserves peaked and declined, was due to the price of oil falling below $100 in August 2014 and then crashing to $30 by the beginning of 2016:

As we can see in the chart, when the price of oil fell below $100, it gutted the oil and goods producing countries economies.  Thus, these countries had to sell off their Reserves (U.S. Treasuries and etc) to offset the losses from a collapsing oil price.  Indeed, this was the very DEFLATION Hugo Salinas Price stated in his article.

Since that article, Hugo and I have had several email exchanges.  In one of our exchanges, he brought to my attention the amount of gold the U.S. would have had to liquidate just to import one million barrels of oil per day.  Looking at his calculations, it turned out to be one hell of a lot of gold.

So, I decided to look into this in more detail to get a better idea of HOW MUCH GOLD would have been liquidated and sold into the market to support the U.S. Empire’s insatiable oil consumption.

Let me tell you, it’s a great deal more than I ever imagined.

The Total Dollar Amount Of U.S. Net Oil Imports Was Quite Large

If we totaled the Dollar amount of U.S. net oil imports since 1973, the figure is staggering to say the least.  According to the U.S. Energy Information Agency (EIA) data on U.S. net oil imports, the United States spent a stunning $4.8 trillion on its net oil imports from 1973 to 2015.  I wanted to provide data going back until 1971, but the EIA’s data for U.S. net oil imports only went back until 1973:

The figures in this chart were calculated by taking the annual average daily net oil imports, multiplying it by the average Brent Crude oil price and then by 365 days per year.  For example, the U.S. spent a record $394 billion on its net oil imports in 2008:

2008 = 11,114,000 barrels per day (x) $97.26 (x) 365 days = $394 billion

While this may not seem like a lot when we compare it to our highly inflated Gross Domestic Product (GDP) of $14.2 trillion in 2008, it turns out to be one heck of a lot of gold when we consider it in respect to our balance of trade deficits.

But, before we get into that, let’s look at a chart of annual U.S. net oil imports since 1973:

As we can see from the chart above, U.S. net oil imports peaked at 12.5 million barrels per day (mbd) in 2005.  According to the EIA, the U.S. consumed 20.8 mbd of petroleum in 2005.  Thus, our net oil imports of 12. 5 mbd were roughly two-thirds (60%) of our total demand that year.

Furthermore, U.S. net oil imports totaled 124 billion barrels from 1973 to 2015.   Again, the total Dollar amount of these net oil imports during that time period was $4.8 trillion.  Even thought that figure may not even raise an eyebrow today, if we consider what it means in “Gold terms”, it’s off the charts.

U.S. Net Oil Imports Cost More Gold Than Entire Global Gold Holdings

If we look at the data provided by the United States Geological Survey (USGS), total global gold holdings were 171,300 metric tons in 2011:

If we include the global gold mine supply from 2012 to 2015, it totaled 12,200 metric tons.  So, if we add that figure to the world gold holdings of 171,300 metric tons, we end up with a grand total of 183,500 metric tons.

Yes, this is just an estimate of all known world gold holdings.  While some readers may believe there are more like 1-2 million metric tons of gold in the world, due to the work of several precious metals analysts… I DON’T BUY IT.  Why?  Because the facts provide the real answer when we look at cumulative gold production since 1493:

Even though this stirs up fanciful “conspiracy theories” such as Yamashita’s massive gold treasure as well as the supposed hidden Nazi gold hoard, the world cannot hold more gold than it could produce.  Well, maybe it could if we had the help of Aliens from distant planets.  While some readers may actually believe Aliens would come down here and mine gold for us, logic suggests that they would likely have much more important things to do with their time.

Anyhow, the chart above reveals that 166,640 metric tons of gold were mined between 1493 and 2014.  If we add what was mined during ancient times, it is logical to assume (estimate) that the world may contain the 183,500 metric tons of gold.

Unfortunately, even though logic can easily destroy lousy conspiracy theories, folks continue to believe them as fact, regardless.  When I get into a logical debate with someone who continues to believe in a lousy conspiracy, I shut up, because there is no use in going further.  While conspiracies do take place in this crazy world of ours, not everything is a conspiracy.

That being said, let’s look at how much gold the United States would have had to liquidate to pay for its net oil imports.

First, let’s look at the table below that shows the Gold-Oil price ratio from 1970 to 1980:

The table displays the gold price, oil price and the ratio on the right.  If we average the Gold-Oil price ratio for the 1970’s decade, we can see that one ounce of gold could purchase 14 barrels of oil.

Second, if we consider that the U.S. average net oil imports were 8 million barrels per day for the 43 year period (1973-2015), that would equate to a staggering 279,500 metric tons of gold:

Yes, that is correct.  If the United States stayed on the gold standard, it would have had to fork over 279,500 metric tons of gold to pay for its net oil imports during that 43 year period (1973-2015).  This is much more than the 183,500 metric tons of known world gold holdings.  Matter-a-fact, the U.S. would have needed almost 100,000 metric tons more of gold to pay for its net oil imports.

This is precisely the reason President Nixon had to abandon the convertibility of the U.S. Dollar into gold.  While there are more factors to consider in the dropping of the Gold-Dollar Peg in 1971, oil was a leading cause.

Okay… I can hear it now from some readers.  Yes, it is true that the United States took this oil and created goods or services that they exported.  So, it makes some sense that not all of of our net oil imports would consume 279.500 metric tons of gold.  However, when we look at additional information…. the situation is even worse.

The U.S. Cumulative Net Trade Deficit Since 1973 Was Far Worse Than Our Oil Import Cost

For those who “doubt” the figures above, I decided to research the U.S. balance of trade since 1960.  When I added up the total net trade deficits, I was more surprised than the figure of the net oil import cost.

This chart below represents the annual U.S. Balance Of Trade in Goods & Services since 1960:

Looking at the top left-hand part of the chart, you will notice the tiny green smudges on the chart.  These represent the U.S. trade surpluses.  Here are a few of the annual trade surpluses (and deficits) during the 1960’s and early 1970’s:

U.S. Balance Of Trade

  • 1965 = $4.7 billion
  • 1966 = $2.9 billion
  • 1967 = $2.6 billion
  • 1968 = $250 million
  • 1969 = $91 million
  • 1970 = $2.2 billion
  • 1971 = -$1.3 billion
  • 1972 = -$5.4 billion

Well, look at that.  In 1971, the U.S. began to suffer trade deficits.  Even though the United States enjoyed a few more trade surpluses in 1973 & 1975, it ran consecutive deficits for the next 40 years, starting in 1976.

You will notice the trade surpluses were quite tiny compared to the deficits, especially after 2000.  If we add up all the U.S. annual trade deficits from 1976 to 2015, it totaled an amazing $10.5 trillion.  Basically, the U.S. Empire was able to bamboozle the world by exchanging worthless U.S. Dollars or Treasuries for energy or real goods and services.

Furthermore, the $4.8 trillion in U.S. net oil imports from 1973-2015 accounted for nearly 50% of the total U.S. trade deficit of $10.5 trillion.  Which means, the U.S. Empire would have needed to FORK OVER even more gold if we consider the total cumulative $10.5 trillion trade deficit since 1976.

Does anyone actually believe the U.S. is going to make good on its $10.5 trillion in trade deficits.  I am making an assumption here (as I have not taken the time to look at the data), but I image the $11 trillion of International Reserves shown in Hugo Salinas Price’s chart above, are mostly accumulated IOU’s from the U.S. Empire.

According to this article on Global Currency Reserves, the U.S. Dollar comprised 63% (in green) of the $11.6 trillion total as of the second half of 2014:

Thus, 63% of the $11.6 trillion equates to $7.2 trillion in U.S. Dollar denominated International Reserves.  Now, where is the other $3.3 trillion of U.S. IOU’s to account for the $10.5 trillion in the total U.S. trade deficit, I have no clue.

The U.S. Empire Would Have Collapsed Decades Ago If It Didn’t Drop The U.S. Gold Standard

As I stated in the beginning of the article, the U.S. Empire would have been TOAST decades ago if it didn’t drop the Dollar-Gold peg.  In order for the United States to continue spreading its SUBURBAN LEECH & SPEND ECONOMY, it desperately needed to come up with a better way to do business than to fork over the rest of its 8,100 metric tons of gold reserves.

Actually, according to the data, U.S. net oil imports that averaged 8 million barrels per day during that 40+ year period, would have liquidated approximately 6,500 metric tons of gold a year.  Here is that table again:

Which means, the U.S. Government had to drop the gold standard, or it would have gone the way of present-day Venezuela decades ago.  That may seem like a stretch to some readers, but keeping the world believing in the “ALMIGHTY U.S. DOLLAR” is job number one for the U.S. Treasury and government.

Now, I am not trying to be harsh against the U.S. government for its U.S. DOLLAR DIPLOMACY POLICIES… I am just stating the facts as I see them.  When we look at the data and figures presented in this article, it is clear to see how vital it was for the United States to continue importing oil, without the cost in REAL MONEY… GOLD.

Again, the only way the U.S. Empire could continue business as usual, was to exchange worthless FIAT DOLLAR IOU’s for oil, rather than fork over gold that it didn’t have.

Especially, when the figures show that the U.S. Empire needed 279,500 metric tons of gold just to pay for its net oil imports.  This turned out to be 100,000 metric tons more gold than the world holds.

This is why the Federal Reserve and Central Banks continue to manipulate the paper price of gold.  Why?  Because, the day the MUSIC FINALLY STOPS, the world will realize there is only one gold chair for the 100 people holding paper IOU’s.

  • Disarmed in CA

    I read once that trade deficits were actually good for the $USD. The more we can get other countries trading and using $USD for common transactions the less able a competing currency is to make a play for supremacy.

    • Thomas Pochari

      I liked this article
      maybe this info will be of interest:

      1.) my task to build an economic science began around 1990 or so but much preparation was required before even beginning to undertake this work and that preparation effectively started when I was 16 yrs old, in 1974
      2.) for many years I was examining the history of science and realized that I should be able to create a science of history
      3.) my French father-in-law, a medical doctor and surgeon, gave me in the mid1990s a one page summary of the most important events in history, published by a French encyclopedia; I carried this around the world with me, in my travels, and one day I suddenly understood why Johann Gutenberg was able to invent the printing press just several years after two major events, the fall of Constantinople in 1453 and the end of the 100 yr War, also in 1453; these two events marked the “bottoming out” of the world economy at the time, and hence the very rich, the powerful elite, were very much weakened and even destroyed which meant that they could not stop powerful and brilliant inventors like Johann Gutenberg
      4.) it appears that the “bottoming out” of the economic cycle took place sometime between the 12th and the 15th centuries, and this is confirmed by the growth of the population
      5.) I prefer to use the term “wealth-creation science” instead of the commonly used “economic science”; we are creating wealth, and it is the science of creating wealth that we need to examine and study and develop
      6.) CENTRAL THESIS OF THEORY: the human animal lowers the cost of transmitting information from one brain to another and this results in science/knowledge and science/knowledge results in the development of the 3 fundamental sources of economic growth and development – which means of course wealth-creation; there are three distinct phases of human history, three periods where the cost of transmitting information/knowledge was dramatically lowered, resulting in an explosive increase in the fundamental sources of economic growth and development; between each phase there is a clear downturn, a collapse of living standards and growth as well as population
      7.) there are THREE fundamental sources of economic growth and development:
      energy for power
      ideas/knowledge/technology for efficiency
      the cycle for adaptation
      8.) there are THREE secondary sources of economic growth and development:
      commerce
      debt
      central banking power/policy
      9.) since the year 2000 it appears that we’ve not had any economic growth in the United States, we may have had a little growth, but adjusting for inflation I am doubting there has been any significant growth, and the stock market on Wall Street reflects this
      10.) GDP (Gross Domestic Product) is an inaccurate and bogus measure of wealth-creation and economic growth
      11.) the USA is a very corrupt place, the government is very corrupt, the ruling establishment is corrupt and indeed criminal; the media is criminal; the powerful in Washington are like a criminal syndicate
      12.) my work has resulted in me identifying EIGHT LAWS which make up the core of my science (see image at worldaffairsmonthly.com) 13.) this science of mine should enable us to accurately predict in general outlines the future, especially during the transition from Phase 2 of human history to Phase 3
      14.) this science of mine is naturally undergoing “testing” and while I am confident it is highly valuable – it certainly is in my opinion the first real economic science – I do think it will require another five years or so of “testing” and confirmation
      15.) there are only two “unknowns” at this point: the length of the transition to Phase 3 of human history the depth of the transition
      16.) the United States will disappear like Rome, it will disintegrate and disappear, from bankruptcy, civil conflict and war; virtually all the prominent American institutions will be destroyed
      17.) what to do with your investments? I am not a professional investor, though I do have plans to launch a hedge fund destructivecapital.com; I recommended 4 sectors in 2007 and I would still recommend those; I can explain my specific investment advice in an article which I will write; precious metals will rise in
      value very high as we pass through the transition to Phase 3 of human history; when Phase 3 begins, say in 20-25 yrs, the precious metals will sell off, violently
      18.) the value of money will go to zero during the transition to Phase 3 of human history; precious metals and “tangibles” will go very high in value, land, diamonds, tools, anything which can effectively serve as money; I think it is possible for gold to go as high as $100,000-200,000/ounce; silver to $20,000; copper will go even higher in relative terms, because it will be the precious metal for the masses 19.) another innovative approach to economic science is my application (original it seems) of the 80-20 rule to the financial markets; 80% of investors pile into the markets in the last 20% of the bull or bear run; and this will be the case with the transition to Phase 3 of human history; 80% of the people will only come to believe my theories and science in the last 20% of the transition to Phase 3 of history; they will therefore be wiped out, perhaps both financially and physically
      20.) this science I have developed is of course for the benefit of the public, it is yours and you are free to apply it as you like, it is all there for you to study and scrutinize
      21.) it really does appear that “economic science” is a fraud, bogus garbage, a scam – until I developed my own science; “economists” are mostly scammers and charlatans
      22.) what about inflation? Yes, we will undoubtedly have inflation, ample inflation, but it is still very early in the transition to Phase 3 of human history; but please note that since 2000 there has been considerable inflation in the United States; inflation is very difficult to measure, but precious metals will indeed give you a reasonably accurate estimation of the inflation in the economy
      23.) 500 yrs of falling commodity prices ended in 1999/2000 because of the failure of the 3 fundamental sources of growth; during these 5 centuries these 3 drivers of growth were always expanding, hence living standards always rose and the human population always grew 24.) wealth inequality in the United States will grow relentlessly until Phase 3 of human history begins; wealth inequality began growing strongly in the early 1980s; wealth inequality is a reflection of little or no growth in the economy
      _____________________________________________________
      December 24, 2016
      Mr Vladimir Putin
      President of the Russian Federation
      Moscow Russia

      Dear Mr. Putin, I figured it was time to write you a letter and convey some information to you. As you might know, I publish WORLDAFFAIRSMONTHLY.COM on the net, and have been since the spring of 2002. It is possible you also might know that Mr. Donald Trump contacted me in late 2007, sending me his book “Kick Ass and Think Big” [I believe that was the title]. I did an interview with Mr. Trump, which went well. So here is the information I wanted to convey to you and your government: I foresee excellent and very close relations developing between the United States, Russia, and China. The world is undergoing a powerful shift to a new and much more advanced stage of development. I have enclosed a summary of the “economic science” I have created. I am confident it will interest you. Mr. Dennis Tubbergen of Everything Financial Radio (everythingfinancialradio.com) has interviewed me three times. You might want to listen in, on the net. There are three tasks ahead for humanity: 1.) we will come to understand child brain development and function and seek to optimize this development; 2.) we will come to understand adult brain development and function and seek to optimize this development; 3.) and we will build and develop what I call Xipho technology, and this will of course be an optimization of communication technology. Xipho technology will be a convergence of three technologies: internet technology, semiconductor technology, and satellite technology. It is my “creation” and it dates from 2003 or so, even earlier. So you will see that this current world we put up with is coming to an end. It is largely nonsense and stupidity. I would be keen to talk to you, and do an interview. I can come to Moscow if you wish. I am keen to know what you are thinking about the world, and the future of the world. By the way, this letter will be reaching you too late to wish you a merry Christmas, apologies for that. But a late best wishes is better than none at all! By the way, many years ago my wife and I, when we were very young, visited the Soviet Union, Moscow and Leningrad. It was a pretty gruesome experience, to be honest, but I was much impressed with the Russian potential and Russian forbearance. Sincerely,
      Thomas Pochari

      • INFOCAT

        That is indeed the longest shilling comment i have ever read.

        I’m not gonna delete it just because its so hilarious.

        • Dave Cockayne

          It is hilarious, but the idiot gets money because people click the links he shares. Please edit out all references to his sources of income and he will go away.

  • Rob34

    The music won’t stop overnight. First they’ll go to five gold chairs for 100 people holding paper IOU’s, which means a POG of $2500 or something like that. And the gold chairs will increase until the money mafia can’t handle it anymore and then … they’ll resort to BIG war.

  • TR

    You’re using historical prices of gold because they are fact – within that context. But the gold price responds to supply and demand like any other commodity. Had the USD-Gold peg been maintained, would you be so confident that historical prices of gold wouldn’t have been different?

  • guard4her

    Any article with the words “conspiracy theory” in it is automatically rejected.

  • guard4her

    How to steal from trading partners:

    First lie to them and tell them they can redeem your dollars for gold.

    Next, after printing trillions in counterfeit dollars, default on your obligations to your trading partners.

    The entire article is crap. All it says is the US can’t survive without stealing from others. That is a lie. The US must collapse precisely because it DOES steal from everyone around it. Thieves can only appear temporarily to be successful. Honest productive people have real long term success.